Final answer:
An investor might calculate the value of a share of stock in Babble, Inc. using the dividend discount model without a given discount rate, by dividing the total dividends by the number of shares.
Step-by-step explanation:
The information provided suggests doing a valuation of Babble, Inc. based on expected profits which are to be paid out as dividends to shareholders. To determine what an investor will pay for a share of stock in Babble, Inc., one could use the dividend discount model, which calculates the present value of expected future dividends.
Since the company plans to disband after two years, we consider the dividends expected to be received in the present ($15 million), one year from now ($20 million), and two years from now ($25 million). With 200 shares of stock to sell, dividing the total expected dividends by the number of shares gives us the value per share.
The calculation would typically also account for a discount rate to account for the time value of money, which is not provided in the details. If we simply allocate profits equally to shares without discounting for time value, we would divide the total profits ($60 million over three periods) by the total number of shares (200) to find the value of one share.